In 2018, fast-food chain BurgerIM was the brand to watch. After opening 200 locations in the span of three years and securing more than 1,200 franchise agreements, the success of the quickly expanding burger concept seemed inevitable.
However, as it turns out, BurgerIM’s rapid growth masked a troubled operation, one which experts are now calling “one of the greatest franchising disasters in recent memory.” Just as quickly as it rose to a seeming success, BurgerIM is currently experiencing an epic downfall—one that may soon push it into bankruptcy… or worse.
According to Restaurant Business, BurgerIM had a fleet of about 280 restaurants at the height of its success, which all served slider-style burgers with various patties. The concept originated in Israel, where founder Oren Loni owned several food brands. Loni brought the concept to the United States and started onboarding franchisees at a rapid speed. (RELATED: 100 Unhealthiest Foods on the Planet.)
Operators interviewed by Restaurant Business say that becoming a BurgerIM franchisee seemed to promise a lucrative, low-cost, and risk-free opportunity, but soon, it became clear that BurgerIM’s leadership had no intention of running an actual franchise. Their only interest, the operators claim, was collecting the initial franchisee payments of $50,000 as the company’s main source of revenue.
Many of them report having a difficult time opening their restaurants due to construction expenses and leases that ran much higher than BurgerIM’s estimations. The chain’s extensive, complicated menu also made operations too costly. Dozens closed their doors after only several months in business or never fully opened before going bankrupt. It’s reported that BurgerIM provided little support (even failing to collect monthly royalty payments from their operators, leading to employees going months without salaries).
By 2019, BurgerIM faced dozens of lawsuits from franchisees looking to collect a refund. By the end of the year, the company’s corporate team was unreachable and calls to company headquarters went unanswered. According to reports, Oren Loni had left the country. Meanwhile, the company was still reportedly closing more agreements with new franchisees, even while facing bankruptcy.
As of this March, the company still hasn’t filed for bankruptcy, but it is under new management who’s trying to salvage the brand. According to Franchise Times, BurgerIM has reached a settlement with the state of California, ordering the company pay $4 million in fines for violating the state’s franchise regulations and refund more than $57 million in franchise fees.
Most of the chain’s restaurants are now closed, with some 125 locations still operating… but not necessarily for long.
For more on restaurant bankruptcies, check out the 10 Biggest Restaurant Chain Bankruptcies of 2020, and don’t forget to sign up for our newsletter to get the latest restaurant news delivered straight to your inbox.
Read the original article on Eat This, Not That!
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